Sunday, November 8, 2009

Re: excellent article for state candidates

Pamela J. Brown wrote:

PB) This "voting-with-your-feet" process then forces the unproductive states to adopt the efficient practices introduced in efficient states -- such as outsourcing Prison Management to efficient management companies via a competitive bidding process (rather than using protected labor cartels, the prison-guard Unions). But ...this is not all that is going on in the high-tax states. A big part of the cost of government is wealth transfers, not just public goods. (PB

The best way to attack the problem of rent-seeking is to make voting-with-your-feet more powerful. And the best way to do that is by replacing all government taxes on labor/production/exchange with a tax on site value. Those who hold land (monopolize a site) have its value increased by local public services. Public services that can't be supported by user fees should be financed only by recovering the extra value those services create in the free market for land. This creates automatic pressure to defund public services that the community does not actually value, and automatically limits tax revenues by giving taxpayers the option of exit.

Many libertarian economists consider site-value taxes to be the least bad form of taxation, because such taxes have no deadweight loss. Taxing production, labor, or exchange can make them hide, shrink, or flee, but the supply of sites (i.e. the surface area of the Earth) is fixed -- it cannot be augmented or reduced, and sites cannot be moved or hidden.

Taxing site value is not only less inefficient than taxing labor/production/exchange, but it also is less intrusive. All the government needs to know is who owns each plot of land and how much the unimproved land is worth. Appraisers and insurers make such calculations routinely, and one variant (advocated by LP founder David Nolan) would let each site-holder self-assess as long as he's willing to take any offer over his assessed value. There's no need to audit anyone's behavior, as with taxes on labor/production/exchange. You don't even need to visit the site or look over the fence, as you do with taxes on land improvements or square footage. Nobody would be taxed off their land, because the tax on assessed value could accumulate as a lien that is capped at the market value of the property.

LPCA economist Prof. Fred Foldvary (Santa Clara U.) has written more on this idea: